\/W^ 


THE  POLITICAL  ECONOMY 


AND 


Business  Management  of  the  Railroad 

T.  F.  MORAN. 


TCE  LIBRARY  OF  TKE 

JAN  ^     .V.S.I 


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THK  POLITICAL  ECONOMY 


AND 


Business    Management  of  the  Railroad 


A    SYLLABUS    OF   LECTURES 


PREPARED  FOR  USE  IN 


PURDUE    UNIVERSITY 


—BY- 


THOMAS  F.  MORAN,  Ph.  D. 
Professor  of  History  and  Political  Economy 


1898 


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(AN  -      . .  • 


1898. 

HOME     JOURNAL     PRINTING     CO. 
LAFAYETTE,  IND. 


3SS.Z 


REFERENCES. 


1.  Hadley's  Railroad  Transportation. 

2.  Dabney's  Public  Regulation  of  Railways. 

3.  Stickney's  Railway  Probletn. 

4.  I<ewis's  National  Consolidation  of  the  Railways  of  the  United 

States. 

5.  Adams's  Railroads  and  Railroad  Questions. 

6.  Alexander's  Railway  Practice. 

7.  Dixon's  State  Railroad  Control. 

8.  Acworth's  Railways  and  the  Traders. 

9.  Haines's  American  Railway  Management. 

10.  Atkinson's  Railway,  the  Farmer,  and  the  Public. 

11.  Bryce's  A merica?i  Commonwealth. 

12.  lyalor's  Cyclopcedia. 

13.  The  American  Railway,  by  Thomas  Curtis  Clarke  and  others. 

14.  Compendiiim  of  Transportation  Theories. 

15.  Proceedings  of  the  American   Railway    Master    Mechanics' 

Association,  Vol.  XXX,  1897. 

16.  Proceedings  of  the  Master   Car  Builders'  Association,  Vol. 

31.  1897. 

17.  M.  C.  B.  Rules  for  Interchange,  1897. 

18.  M.  C.  B.  Standards  and  Recommended  Practice,  1897. 

19.  Railway  Reports  and  Hand-books  of  Rules  and  Regulations. 

20.  Land  Transportation  Volume,  Eleventh  Census. 

21.  Eleventh  Annual  Report  of  Interstate  Commerce  Commission, 

December  i,  1897. 

22.  American  Engineer. 

23.  Engineering  News. 

24.  Engineering  Record. 

25.  Locomotive  Engineering. 

26.  Railway  and  Engineering  Review. 

27.  Railway  Age. 

28.  Railroad  Gazette. 

29.  Voor's  Manual  of  Railroads,  2,oih.  Nnmher,  1897. 

—3— 


LECTURE  I. 

The  Industrial  Importance  of  the  Railway. 


About  nine  or  ten  years  ago  Professor  Hadley  of  Yale  made 
the  following  statement  in  Scribncr's  Magazine:  "The  railroads 
of  the  world  are  to-day  worth  from  twenty-five  to  thirty 
thousand  million  dollars.  This  probably  represents  one- tenth  of 
the  total  wealth  of  civilized  nations,  and  one-quarter,  if  not 
one-third,  of  their  invested  capital.  It  is  doubtful  whether  the 
aggregate  plant  used  in  all  manufacturing  industries  can  equal  it 
in  value.  The  capital  engaged  in  banking  is  but  a  trifle  beside 
it.  The  world's  whole  stock  of  money  of  every  kind — gold, 
silver,  and  paper  —would  purchase  only  a  third  of  its  railroads. ' ' 

Since  this  striking  statement  was  made  the  amount  and 
value  of  railroad  property  have  been  very  considerably  increased. 
The  railway  mileage  of  the  United  States,  for  example,  has 
increased  17  per  cent  in  the  last  decade,  and  the  value  of  our 
railroad  property  has  undoubtedly  increased  to  a  still  greater 
extent.  When  we  consider  that  nearly  one-half  of  the  railway 
mileage  of  the  world  is  operated  within  the  United  States,  we 
can  form  some  conception  of  the  vast  magnitude  of  our  railroad 
interests.  It  is  undoubtedly  a  fact  that  quite  a  considerable  part 
of  the  American  people  do  not  adequately  appreciate  the 
importance  of  the  railroad  industry,  and  do  not  realize  how 
intimately  the  railroad  interests  are  connected  with  the  political, 
military,  and  industrial  welfare  of  the  Nation. 

A  few  facts  and  figures,  presented  in  condensed  form,  will 
aid  in  the  formation  of  a  true  conception  of  the  magnitude  and 
industrial  significance  of  this  enterprise.  The  United  States 
government  prints  for  the  benefit  of  the  public  a  vast  mass  of 
information  a  large  part  of  which  fails  to  accomplish  its  intended 
purpose,  because  it  is  not  tersely  and  concisely  stated.  However, 
from  the  public  documents  relating  to  the  railways  we  may 
glean  much  valuable  information,  provided  these  documents  be 
sifted  and  interpreted  properly. 

The  Eleventh  Annual  Report  of  the  Interstate  Co7nmerce 
Commission,  published  December  i,  1897,  contains  some  facts 
worthy   of  our  consideration.      Some   items   in   the   statistical 

—4— 


portion  of  the  report  deserve  more  than  a  passing  notice.  I 
select  a  few  of  these  items  for  the  purpose  of  noting  the  lesson 
which  they  teach. 

The  total  railway  mileage  in  the  United  States  on  June  30, 
1896,  was,  according  to  the  report,  182,776.63  miles.  The 
railway  capital  of  the  United  States  is  $10,566,865,771,  a  sum 
which  seems  prodigious  when  compared  with  the  amount  of 
money  invested  in  any  other  industry  except  agriculture.  The 
gross  earnings  of  the  railroads  of  the  United  States  amounted  to 
$1,150, 169,376  for  the  year  ending  June  30,  1896.  During  the 
same  year  the  railroads  of  the  United  States  carried  511,772,737 
passengers  and  765,891,385  tons  of  freight. 

These  figures  represent  in  condensed  form  the  vast  service 
of  the  railroad  to  the  public  as  a  common  carrier.  There  are 
some  other  items,  however,  even  more  significant,  and  these 
should  be  considered  by  the  laboring  man  and  those  having  his 
welfare  at  heart.  During  the  year  ending  June  30,  1896,  the 
railroads  of  the  United  States  paid  out  $468,824,531  in  wages 
and  salaries  to  their  employes.  This  sum  represents  60.65  per 
cent  of  the  total  operating  expenses  of  the  railways.  They 
gave  employment  to  826,620  men,  and  it  is  fair  to  assume  that 
not  less  than  two  and  one-half  millions  of  people  in  the  United 
States  are  directly  dependent  upon  the  railroads  for  their  means 
of  livelihood. 

These  facts,  showing  the  magnitude  and  importance  of  the 
railway  interests  in  the  United  States,  should  be  borne  in  mind 
by  the  American  public  when  criticising  railway  management. 
There  is  need  for  a  more  just  and  discriminating  public  opinion 
with  regard  to  this  matter.  The  railways  have  their  short-comings 
and  should  be  brought  to  an  account  therefor;  but  care  should 
be  taken  not  to  condemn  the  railroad  in  general  for  the  offense 
of  some  particular  system.  Adverse  criticism  should  be  dis- 
criminating and  not  wholesale.  There  is  need  for  it  and  it  can 
serve  a  good  purpose  when  justly  administered,  but  may  result 
disastrously  when  such  is  not  the  case.  An  unjust  and  indis- 
criminating  public  opinion  is  likely  to  result  in  vicious  leglislation. 
The  so-called  "Potter  I<aw,"  passed  by  the  legislature  of  Wis- 
consin during  the  Granger  movement,  is  an  instance  in  point. 
This  ill-advised  piece  of  legislation  tended  to  sap  the  industrial 

—5— 


life  of  the  state,  and  the  very  men  who  were  instrumental  in  its 
passage  in  1874  were  most  urgent  in  demanding  its  repeal  in  1876. 
There  is  a  misconception  in  the  popular  mind  regarding  the 
profits  made  by  railways.  A  few  figures  on  this  point  are 
significant.  The  report  of  the  Statistician  of  the  Interstate 
Commerce  Commission,  an  impartial  authority,  shows  that 
during  the  year  ending  June  30,  1896,  70.17  per  cent  of  the 
railroad  stock  in  the  United  States  paid  no  dividends.  This  is 
the  largest  amount  of  non-dividend-paying  stock  in  the  history 
of  the  Commission.  The  total  amount  of  the  dividends  paid  was 
$87,603,371;  an  average  of  5.62  per  cent  upon  the  dividend- 
paying  stock,  or  of  1.68  percent  upon  the  entire  stock.  Some 
roads  are  making  magnificent  profits,  others  are  not  making 
their  running  expenses;  hence  in  criticism  the  necessity  of 
discrimination. 

The  experience  of  England  is  instructive  in  this  particular. 
The  attitude  of  the  public  in  general  and  of  the  legislator  in  par- 
ticular toward  the  railway  is  much  less  hostile  and  more  dis- 
criminating than  in  America.  Due  largely  to  this  policy  the 
roads  of  England  are  now  in  a  very  prosperous  condition. 
Nearly  all  of  the  stock  is  paying  dividends,  interest  on  bonds  is 
promptly  paid,  and  the  wages  of  employes  have  in  many 
instances  been  voluntarily  increased. 

There  are  abuses— some  of  them  of  a  serious  nature  -  con- 
nected with  the  administration  of  railways  in  the  United  States. 
Some  of  them  we  shall  have  occasion  to  note.  At  the  outset  I 
would  urge  that  you  divest  yourselves,  in  so  far  as  possible,  of 
any  preconceived  notions  and  prejudices  not  resting  on  a  basis  of 
fact. 

1.  The  railway  is  unlike  most  other  business  enterprises 
and  as  a  consequence  many  of  the  laws  of  Economics  are  not 
applicable  to  it. 

(a)  Capital  is  fixed. 

(b)  It  is  not  easy  to  expand  or  contract  its  facilities 

to  suit  the  demands  of  trade. 

2.  The  railway  has  made  modern  business  methods  possible. 

(a)  It  has  created  a  "world-market." 

(b)  It  has  made  large  cities  possible. 

—6— 


5-     The  railway  from  a  military  point  of  view. 

(a)  In  the  Franco-Prussian  War. 

(b)  In  the  American  Civil  War. 

4.  The  railway  and  the  postal  system. 

(a)  Effect  on  business. 

(b)  Effect  on  general  culture. 

5.  The  railway  and  the  express  company. 

6.  The  railway  and  the  West. 

(a)  "They  [the  railroads]  may  indeed  be  said  to 

have  made  the  West, "    Bryce  II,  506. 

(b)  Statisticians  assert  that  every  dollar  invested  in 

railroad   building    adds    ten   dollars  to  the 
value  of  the  adjacent  property. 

(c)  Land  grants  and  subsidies. 

7.  The  railway  tends  to  unify  and  to  civilize. 

8.  Arguments  of  Frederick  List  in  favor  of  the  railway,  in 
1841: 

"  I .  As  a  means  of  national  defense,  it  facilitates  the  con- 
centration, distribution  and  direction  of  the  army.  2.  It  is  a 
means  to  the  improvement  of  the  culture  of  the  nation,  as  it 
facilitates  the  distribution  and  promotes  the  rapidity  of  distri- 
bution of  all  literary  products,  and  the  results  of  the  arts  and 
sciences.  It  brings  talent,  knowledge  and  skill  of  every  kind 
readily  to  market,  and  increases  the  means  of  education  and  in- 
struction of  each  individual  and  of  each  class  and  age.  3.  It 
secures  the  community  against  dearth  and  famine,  and  against 
excessive  fluctuation  in  the  prices  of  the  necessaries  of  life.  4. 
It  promotes  the  hygienic  conditions  of  the  community,  as  it  de- 
stroys distances  between  the  sufferer  and  his  means  of  cure.  5. 
It  promotes  social  intercourse,  and  brings  friend  to  friend,  and 
relative  to  relative.  6.  It  promotes  the  spirit  of  the  nation,  as  it 
has  a  tendency  to  destroy  the  Philistine  spirit  arising  from 
isolation  and  provincial  prejudice  and  vanity.  It  binds  nations 
by  ligaments,  and  promotes  an  interchange  of  food  and  of  com- 
modities, thus  making  it  feel  to  be  a  unit.  The  iron  rails  be- 
come a  nerve  system,  which,  on  the  one  hand,  strengthens 
public  opinion,  and,  on  the  other  hand,  strengthens  the 
power  of  the  state  for  police  and  governmental  purposes." — 
Quoted  by  Simon  Sterne  in  Lalor,  III,  499. 

—7— 


g.     Propositions  of  G.  R.  Blanchard: 

"3.  That  upon  nearly  all  the  tonnage  carried  in  the  United 
States  the  rates  average  greatly  less  than  those  charged  for 
similar  rail  transportation  in  other  portions  of  the  world. 

4.  That  our  present  rates  do  not  average  one-half  the 
charges  made  15  years  ago. 

5.  That  with  this  decrease  has  come  increased  speed,  re- 
sponsibility, security  of  transportation,  absorption  of  lateral 
charges,  stoppage  of  transfers,  etc.,  unequalled  elsewhere. 

6.  That  with  the  lower  rates  and  quicker  freight  transit  we 
pay  railway  labor  much  the  highest  railway  wages  of  the  world, 

7.  That  the  basis  of  railway  taxation  is  being  constantly 
increased." 

Railway  Age,  April  21,  1893. 

Also  in  Compendium,  94. 
10.  "Bvery  man  in  the  land  is  interested  daily  and  con- 
stantly in  railroads  and  the  transportation  ofpersons  and  property 
over  them.  The  price  of  whatever  he  eats,  or  wears,  or  uses,  the 
cost  and  comfort  of  travel,  the  speed  and  convenience  with  which 
he  shall  receive  his  mail  and  the  current  intelligence  of  the  day, 
and  even  the  intimacy  and  extent  of  his  social  relations,  are  all 
largely  affected  thereby." 

Cooley,  in  The  American  Railway,  XXVII. 


—8— 


LECTURE  II. 
The  Business  Organization  of  the  Railway. 


I.  Plans  of  business  organization  diflfer  somewhat  with 
different  roads.  There  is  no  Atnerican  railway  system,  in  the 
same  sense  that  there  is  an  BugHsh,  French  or  Prussian  system. 
The  tendency,  however,  is  toward  consolidation. 

2      Principal  duties  in  railroad  management: 

(a)  "The  physical  care  of  the  property. 

(b)  The  handling  of  the  trains. 

(c)  The  making  rates  and  soliciting  business. 

(d)  The  collection  of  revenue  and  keeping  statistics. 

(e)  The  custody  and  disbursement  of  revenue." 

The  American  Railway,  151. 

3.  The  President. 

4.  The  Vice-President. 

5.  The  Board  of  Directors. 

6.  The  General  Manager  has  the  following  subordinates: 

51      Track 
2'     Bridges 
3!     Buildings. 

The  Superintendent  is   assisted  by  Supervisors  of  bridges 

and  of  road.     These  supervisors  have  charge  of  the  section  men 

and  "bridge  gangs." 

(b)  Superintendent  of  Machinery  has  charge  of  the 

rolling  stock. 

(i)     Master  Machanic 
(2 )     Master  Car  Builder. 

(c)  Superintendent  of      (  ^;     o'st'^ition  of  cars. 

Transportation    |^_     Movement  of  trains. 
General   rules  governing   the  movement  of  trains.       The 
"Block  System."     Rules  for  delayed  trains. 

ii.     Rates. 
2.     Advertising. 
3.     Soliciting  of  business. 

( 1 )  General  Passenger  Agent. 

(2)  General  Freight  Agent. 

-9— 


Income  of  road: 

70  per  cent  from  freight  trafific. 
25  per  cent  from  passenger  traflSc. 
5  per   cent    from      mail,      express,     sleepers,     news 
privileges,  etc. 

(e)  Comptroller  or  General  Auditor  |  ^^  stTtisticr^^ 

(f)  Paymaster  disburses  money  under  direction  of 

General  Auditor. 

7.  The  Treasurer. 

8.  Bills  of  Lading. 

9.  Way  Bills. 

10.  The  Purchasing  Department. 

11.  The  Legal  Department. 

(a)  Damage  suits. 

(b)  Legal  documents. 

The  above  outline  represents  the  general  form  of  business 
organization.  Each  railroad,  however,  has  its  own  individualty. 
The  organization  is  comparatively  simple  in  outline  but  extremely 
complicated  in  detail.  It  furnishes  good  examples  of  division  of 
labor  and  mastership  in  industry.  There  must  be  executive  and 
technical  ability  of  the  highest  possible  kind  to  manage  success- 
fully the  825,000  men  engaged  in  railroading  in  the  United 
States  and  to  attend  to  the  details  incident  to  183,000  miles  of 
track. 


-10 — 


r  Comptroller.. 


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a 

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O 

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a 

O 


-Purchasing 
Agent- 


— Auditor  ol  Receipts 

— Auditor  of  Disbursements 

— Traveling  Auditor 

— Local  Treasurers 

— Local  Paymasters 

—Clerk  of  Statistics 


—Local  Storekeepers 


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-Division 
Sup't 


— Station  Agents — 


Train  Master — 


— Receiving  Clerks  and  Laborers 

— JvOading  Clerks  and  Laborers 

—Billing  Clerks 

—Discharging  Clerks  and  Laborers 

—Delivery  Clerks 

— Collectors 

I  Yard  Engines 
—Yard  Master—  -<  Switchmen 

(  Brakemen 

— Train  Dispatchers 
—Operators 
—Conductors 
—Trainmen 


-Sup't  of 
Machinery — 


j  Sup't  on  _ 
I  Road'y  j 


— Master 

Mechanic- 


-Foreman  Machine 
Shop— 


—Engine  Runners 

Firemen 
—Hostlers  and  Cleaners 
— Mechanics 
— Laborers 


-Road  Master  . . — 


—Foreman  CarShop- 


-Supervisors  of 

Bridges- 


-Car  Acc'nt-i^ostCar 
I  Agents 


-TrafficM'g'r- 


— Gen.  Pass.Agt.- 
— Claim  Agent 
—Gen.  Fr't  Agt.- 


— Supervisors  of 

Road— 


-Traveling  Agents 

-Local  Agents 

-Rate  and  Div.  Clerks 


— Traveling  Agents 
—Local  Agents 
—Rate  and  Div.  Clerks 


-Car  Inspectors 
-Greasers 
-Mechanics 
-Laborers 

-Bridge  Foremen 
-Watchmen 
-Carpenter  Gangs 
-Mason  Gangs 


-Section  Foremen 
-Gangs  and  Track 

Walkers 
-Wood  and  Water 

Tenders 
-Floating  Gangs 
-Construction  Trains 


Diagram  showing  the  Skeleton  of  a  Railroad  Organization— American  Railway,  185. 


LECTURE  III. 

The   Management   of    Cars   in   Through- 
Freight   Traffic. 


1.  The  freight  cars  are  now  almost  the  common  property  of 
the  various  roads.  The  average  freight  train  contains  cars  of 
several  different  roads.  It  may  have  but  comparatively  few 
cars  belonging  to  its  own  road.  The  development  of  transporta- 
tion has  brought  about  this  result.  There  was  found  to  be  a 
great  loss  of  time  and  labor  in  transferring  goods  from  the  cars  of 
one  company  to  those  of  another,  at  the  end  of  a  line;  hence  the 
cars  are  sent  without  change  to  the  destination  of  the  goods.  The 
expense  of  unloading  and  reloading  is  thus  obviated.  The 
saving  of  time  is  even  more  important. 

2.  The  following  abstract  from  an  article  in  The  Afnerican 
Railway,  by  Theodore  Voorhees,  will  illustrate  "the  wanderings 
of  a  car": 

A  car  was  loaded  in  Indianapolis  on  Dec.  14,  1886.  It 
reached  Cleveland  on  the  i6th  and  East  Buffalo  on  the  28th.  On 
Dec.  31  it  was  at  Rotterdam  Junction,  and  shortly  after  reached 
Boston.  On  Jan.  24,  1887,  it  left  Boston  and  was  soon  in  Med- 
field.  On  March  17  the  car  was  unloaded  and  returned  to  Boston 
to  be  returned  west.  On  March  31  it  was  loaded  with  coal  for 
Chicago.  It  reached  Chicago  on  April  10,  and  was  at  once  sent 
to  Minot,  523  miles  west  of  St.  Paul,  arriving  April  14.  Here 
the  car  was  unloaded,  returned  to  St.  Paul  and  loaded  with 
wheat  for  New  York.  It  left  St.  Paul  April  26  and  reached 
Chicago  April  28.  Dela5^ed  by  accident  it  did  not  reach  Buffalo 
until  July  18.  It  was  then  hurried  to  New  York  and  unloaded. 
The  car  was  then  sent  to  Scranton,  loaded  with  coal  for  the 
second  time,  and  reached  Chicago  Aug.  12.  After  being  unloaded 
it  was  reloaded  for  Buffalo.  For  the  third  time  the  car  was  sent 
back  to  Chicago  loaded  with  coal,  arriving  October  13.  Here  it 
was  loaded  for  Newport  News,  going  through  Indianapolis  en 
route,  and  arriving  at  its  destination  on  the  loth  of  November. 
We  next  find  it  in  Georgia,  then  in  South  Carolina.  Later  it 
appears  at  Selma,  Ala.,  then  at  Atlanta.     On  February  11,  i888, 

— 12 — 


it  is  at  Augusta,  Ga.  On  March  12  the  car  was  loaded  in  South 
Carolina,  and  worked  its  way  back  north  and  was  delivered  to 
the  home  road  at  Cincinnati  on  April  17,  after  an  absence  of  six- 
teen months  and  one  day. 

"This  is  a  case  taken  from  actual  records,  and  is  one  that 
could  be  duplicated  probably  by  any  railroad  in  the  countr5^"  — 
The  American  Railway^  267-271. 

3.  The  disadvantages  of  the  present  system : 

(a)  It  is  difficult  and  expensive  to  keep  track  of  cars. 

(b)  It  is  difficult  and  sometimes  impossible  to  secure 

cars  for  an  emergency. 

4.  The  Car  Accountant  has  general  supervision  of  the 
location  and  movement  of  cars. 

(a)  He  computes  the  amount  due  his  road  for  mile- 

age, also  amount  due  from  his  road  to  other 
roads.  The  former  rate  of  mileage  was 
three-fourths  of  a  cent  "per  mile  run"  for 
use  of  all  eight-wheel  cars  and  one-half  that 
sum  for  four-w^heel  cars.  At  present  the 
rate  is  three-fifths  of  a  cent  per  mile  run, 
loaded  and  emptj^  for  all  common  cars,  and 
three-fourths  of  a  cent  for  tanks  and  re- 
frigerators. The  amount  paid  for  use  of 
cars  in  this  way  in  a  year  is  considerable  on 
some  roads. 

(b)  He  also  keeps  a  record  of  the  location  of  each 

car,  local  or  foreign,  upon  the  road.  He  re- 
ceives reports  from  conductors  and  station 
agents.  These  show  the  movement  and 
daily  use  of  each  car.  When  a  car  does 
not  move  for  five  days,  an  inquiry  is  made. 
In  case  of  perishable  freight  reports  are  sent 
in  for  each  hour. 

(c)  The  Accountant  should  have  charge  of  empty 

cars.  This  plan  insures  system  and  the 
economic  distribution  of  cars. 

(d)  The  theory  is  that  a  car  may  be  loaded  back 

home  but  never  away  from  home  or  used  for 
local  purposes.     In  practice  the  agent  often 

—13— 


uses  any  cars  which  are  at  hand.  He  is 
urged  by  the  shipper  to  do  so. 
The  Car  Accountant  can  correct  such  abuses, 
trace  delayed  cars,  and  make  claims  for  loss 
or  damage, 
(e)  Under  the  present  system  of  payment  there  is 
no  inducement  to  return  cars  promptly,  and 
as  a  result  they  are  often  unreasonably  de- 
tained. Theodore  Voorhees  suggests  a  mile- 
age of  one-half  cent  and  a  charge  of  ten 
cents  per  day  for  the  use  of  the  car. 

5.  Methods  of  economizing  time  in  freight  traffic. 

6.  The  Indiana  Car  Service  Association. 

7.  Repairs. 

(a)  The  M.  C.   B.    Code  of  Rules  for  Interchange, 

(1897).     General  principles: 

(i)  Car  owners  are  responsible  for  "the 
repairs  to  their  cars  necessitated  by 
ordinary  wear  and  tear  in  fair  ser- 
vice,   ." 

(2)  "Railroad  companies  handling  cars 
are  responsible  for  damage  done  to 
any  car  by  unfair  usage,  derailment, 
accident  or  improper  repairs  made 
by  them, ''  M.  C.  B.  Rides. 

(b)  Car  Inspectors,  v 

(c)  Defect  Cards. 

(d)  Arbitration  Committee, 

8.  Interchange  and  uniformity. 

(a)     M.  C.  B.   Standards  and  Recommended  Practice, 

(1897). 


—14— 


LECTURE  IV. 
The  Purchasing  Department. 


1.  General  duties  of  the  Purchasing  Agent: 

(a)  Purchasing  of  supphes. 

(b)  Distributing  of  supplies  to  Store-keepers. 

(c)  Selling  "old  material." 

2.  The  magnitude  of  the  business. 

"Iron  alone  enters  so  extensively  into  railroad  construction 
and  operation  that  it  is  safe  to  say  three-fourths  of  all  manu- 
factured in  this  country  is  consumed  directly  or  indirectly  in 
this  way; ." — Ameri'an  Railway,  301. 

(a)  Supphes  for  the  Philadelphia  &  Reading  Railroad  cost 
more  than  $3,000,000  per  year. — American  Railway,  299.  Fuel 
costs  the  same  road  Si, 2CO, 000  per  3'ear,  and  the  expense  each 
year  for  lubricating  oil,  grease  and  waste  is  more  than  $150,000. 

About  4,000  car  loads  of  supplies  are  sent  out  annually  to 
the  various  stores  of  the  compan3^ 

(b)  Purchases  of  the  Big  Four  road  for  one  year  are 
approximately-  as  follows: 

Fuel $815,000.00 

Oil  and  waste 112,000.00 

Rails 150,000.00 

Ties 250,000.00 

Stationer}' 86,000.00 

General  supplies 900,000.00 

Total $2,313,000.00 

(c)  Statistics  for  Lake  Erie  &  Western  Railroad. 

3.  The  Purchasing  Agent  must  be  an  expert.  He  must 
study  the  market  and  pass  upon  the  qualit}'  of  a  ver}'  wdde  range 
of  commodities.  There  is  opportunity  here  for  a  considerable 
saving. 

4.  Tests  of  the  various  supplies. 

The  coal,  oil,  etc. ,  are  tested  in  a  scientific  manner  before 
purchases  are  made.  The  efficiency  of  lamps  and  other  articles 
is  also  accurately  determined. 

—15— 


> 


5-  The  Purchasing  Agent  can  tell  accurately  the  cost  in 
cents  per  mile  run  for  fuel,  oil,  etc.,  and  can  detect  extravagance. 
On  the  Pennsylvania  road  there  is  a  coal premiian.  There  is  a 
definite  allowance  for  every  run  and  when  enginemen  use  less 
than  this  allowance  they  are  allowed  a  per  cent  of  their  savings. 
There  is  no  penalty  for  using  more  than  the  allowance,  but  an 
explanation  may  be  demanded. 

(a)  Cost  in  cents  per  mile  run  "under  ordinary  condi- 
tions' ' : 

Cents. 

For  oil,  tallow,  and  waste 0.32 

For  fuel 7.42 

For  engineers. 3.60 

For  firemen , i .  79 

For  wipers  and  watchmen. 1.25 

For  water  supply 0.49 

For  supplies  (miscellaneous) 10 

For  repairs 2.40 

Total 17-37 

American  Railway^  308. 

(b)  Cost  in  dollars  per  100  miles  on  Big  Four  road: 

Passenger.      Freight. 

Repairs 4.01  5.60 

Stores 27  .32 

Fuel 4.40  7.80 

Wages,  E.  and  F 4.92  6. 15 

Cleaning 23  .19 

Water  supply .27  .50 

Other  motive  power  accounts       .52  .76 

Total $14.62  $21.81 

Wastefulness  in  any  line  is  thus  easily  detected. 

6.  Duties  of  the  Store-keeper. 

7.  Stationery  is  an  important  and  an  expensive  item. 
Thousands  of  forms  or  blanks  are  in  common  use.  Envelopes 
alone  cost  from  $15,000  to  $20,000  per  annum  on  some  roads. 
There  must  be  economy  in  contracting  for  supply  of  stationery 
and  in  checking  waste. 

•—16— 


I 


8.  Time-tables  often  cost  roads  from  $30,000  to  $40,000 
per  year. 

9.  Passenger  tickets  are  an  important  item  of  expense. 
They  appear  in  a  variety  of  different  forms  and  tons  of  them  are 
used  each  year  on  a  large  system.  Contracts  are  usually  let  by 
the  year. 

10.  Supplies  for  the  track.  Economy  demands  that  they 
should  be  of  the  best  quality  and  promptly  furnished. 

11.  "Old  material"  and  the  scrap-heap. 

The  amount  received  for  old  material  is  considerable.     Old 

rails  and  wheels  yield  about  60  per  cent   of  the  cost  of  the  new 

ones.     In   the   case   of  some  other  articles  the  salvage  is  insig- 
nificant. 


—  17— 


LECTURE  V. 

Economy  and  Efficiency  in  Railroad  Work. 


I.  The  success  of  a  railway  system  is  due  not  only  to 
sound  principles  of  general  management  but  also  to  economic  ad- 
ministration of  details.  In  these  days  of  close  competition,  small 
margins,  and  large  volume  of  business,  economy  in  small  matters 
and  attention  to  details  often  constitute  the  difference  between 
success  and  failure  in  business  management. 

The  railroad  has  attracted  to  its  service  large  numbers  of 
wide-awake  men  who  must  possess  the  latest  information  and  be 
conversant  with  the  recent  advancements  in  their  particular 
lines.  The  way  in  which  the  officials  of  one  of  the  greatest  rail- 
way systems  in  America  keep  posted  regarding  current  affairs  is 
well  illustrated  by  the  following  extract  from  the  letter  of  Mr. 
William  E.  Curtis  to  the   Chicago  Record  of  February  lo,  1897: 

"At  Philadelphia  the  other  day  I  was  much  interested  by  a 
visit  to  the  editorial  department  of  the  Pennsylvania  railroad.  It 
is  composed  of  about  a  dozen  men,  under  the  direction  of  Mr. 
Frank  N.  Bark.sdale,  and  in  addition  to  looking  after  the  adver- 
tising, their  chief  duty  is  to  read  the  newspapers  for  the  officers 
of  the  company.  About  800  papers  are  received  daily  from  all 
over  the  world,  which  are  faithfully  examined  by  experienced 
readers,  who  understand  all  modern  languages,  and,  like  the 
exchange  editors  of  a  great  newspaper,  can  detect  an  interesting 
paragraph  at  a  single  glance.  Each  man  has  a  pair  of  scissors 
in  his  grasp,  and  clips  every  item  of  news  and  editorial,  every 
personal  and  advertisement,  that  he  thinks  will  interest  the  head 
men  of  the  road. 

"When  the  day's  reading  is  done  the  clippings  are  assorted 
and  pasted  according  to  topics  upon  sheets  of  heavy  manilla 
paper,  bearing  the  date  and  the  title  of  the  classification.  The 
sheets  are  then  separated  and  laid  upon  the  table  of  the  president, 
who  is  thus  able  to  get  the  news  of  the  world  and  expressions  of 
public  opinion  upon  important  topics  at  a  glance.  When  the 
president  reads  them  he  passes  them  down  to  the  vice-presidents, 
the  general  manager,  the  general  solicitor,  the  general  passenger 
and  freight  agents  and  other  officials,  and  when  they  have  all  had 
their  chance  the  sheets  are  returned  to  Mr.  Bark.sdale,  who  files 
them  away  in  pigeon  holes  according  to  their  date.  Thus  the 
history  of  the  world  is  preserved  for  ready  reference  in  a  per- 
manent form,  and  articles  of  importance  are  indexed." 

—18— 


2.  There  is  no  business  in  which  the  distinction  between 
true  and  false  economy  is  more  apparent  than  in  railroading. 
The  best  of  service  and  material  is,  in  the  long  run,  the  most 
economical. 

"The  high  object  of  our  profession  is  to  consider  and  de- 
termine the  most  economic  use  of  time,  power  and  matter." 

3.  The  economy  of  the  Purchasing  Department. 

In  the  purchase  and  distribution  of  supplies,  there  is  op- 
portunity  for  a  vast  number  of  small  economies.  The  total  sav- 
ing possible  in  a  large  system  is  an  important  item. 

4.  The  railroads  of  the  United  States  employ  over  826,000 
men.  Strict  discipline  is  therefore  essential  to  efficient  and 
economic  service.  The  "Record  Discipline"  plan  recently 
adopted  by  the  Erie  road  seeks  to  accomplish  this  end.  A  com- 
plete record  is  kept  of  the  merits  and  demerits  of  each  employe. 

'  'A  charge  will  be  made  in  the  record  book  for  every  case  of 

neglect  of  duty,  violation  of  the  rules  or  regulations, 

improper  conduct,  etc. ' ' 

' '  When  the  record  against  an  employe  becomes  such  as  to 
demonstrate  his  unfitness  for  service  he  will  be  dismissed." 

"Special  credit  will  be  given  on  an  employe's  record 

for  notably  excellent  conduct,   good  judgment  in  emergencies, 
loyalty,  etc." 

5.  The  track  of  the  Pennsylvania  road  is  not  surpassed  in 
the  United  States.  No  small  part  of  this  excellence  is  due  to 
the  competitive  prize  system  devised  in  1879  by  Mr.  Frank 
Thomson,  then  general  manager.  Economy  and  efl&ciency  are 
here  combined. 

The  road  is  divided  into  various  divisions  and  cash  prizes 
are  given  to  supervisors  and  section  foremen  having  their 
track  and  roadbed  in  the  best  condition . 

Advantages  of  the  system: 

(a)  The  men  are  the  judges  of  the  work  and  this 

participation  causes  a  closer  sympathy  be- 
between  them  and  the  oflScers  of  the  road.  The 
tendency  is  to  prevent  strikes. 

(b)  The  standard  of  excellence  is  known  to  the  men 

and  they  strive  to  attain  it. 

—19— 


5.  A  complete  and  exact  sj'stem  of  accounts  is  an  aid  to 
economic  and  efficient  management.  The  sendees  of  Albert 
Fink  have  been  invaluable  in  this  respect. 

A  correct  estimate  may  thus  be  put  upon  the  economic 
services  of  an  employe.  Some  roads  give  premiums  for  good 
results.     All  roads  discharge  for  very  poor  results. 

7.  The  business  management  of  railroad  shops. 

(a)  Monon  Shops,  LaFayette. 

(b)  Pennsj-lvania  Shops,  Indianapolis. 

(c)  The  Big  Four  Shops,  Brightwood  (Indianapolis) . 
(i)  Discipline.  (2)  Genuineness  of  work.  (3) 
Economy  in  details.  (4)  The  supply  house. 
(5)  Care  of  machinery'.  (6)  Economic  devices. 
(7)  The  fire  department.  (8)  The  position  of 
the  "agitator." 

8.  The  wages  paid  bj^  American  Railroads  insures  efficient 
services.  An  article  in  The  Railway  Age,  for  March  11,  1898, 
on  "lyabor  on  American  and  English  Railways"  furnishes  some 
interesting  contrasts.     The  following  table  is  suggestive : 

United  States.  England. 

Gross  earnings • $1,150,169,376         $368,190,000 

Operating  expenses 772,989,044  208,485,000 

Interest  and  fixed  charges 350,250,493  99,625,000 

Dividends 87,603,371  63,060,000 

Expenditure  for  labor 468,824,531  97,765,000 

The  labor  charge  on  English  railways  is  26.5  per  cent  of 
the  earnings,  while  in  America  it  is  40. 7  per  cent — a  difference 
of  14.2  per  cent. 

In  England  the  total  expense  of  operation  is  57  per  cent  of 
the  gross  earnings;  in  America  it  is  about  68  per  cent.  If  we 
deduct  the  labor  charge,  however,  all  other  expenses  of  opera- 
tion are  conducted  for  3  per  cent  less  in  America  than  in  Eng- 
land. 

"For  every  dollar  paid  to  the  stockholders  in  England  labor 
gets  $1.55;  for  every  dollar  paid  to  the  stockholders  in  America 
labor  gets  $5.35." 

"In  England  labor  constitutes  46.89  per  cent  of  the 
operating  expenses.  In  America  60.35  per  cent  of  the  operating 
expenses  go  to  labor. ' ' 

— 20 — 


These  facts  show  ( i )  the  economy  of  American  methods  of 
management  and  (2)  that  the  interest  of  labor  in  American  rail- 
ways is  much  greater  than  that  interest  in  the  railways  of 
England.  I,egislation  which  tends  to  cripple  the  railway  is 
hostile  to  the  interests  of  American  labor. 

9.  The  economy  and  efficiency  in  American  construction 
are  shown  by  the  remarkable  demand  on  the  part  of  foreign 
nations  for  American  locomotives. 


-21 — 


LECTURE  VI. 
The  History  of  Transportation  in  the  United  States. 


'  'The  movement  of  goods  in  a  year  on  all  the  through  routes 
of  the  world  a  century  ago  would  not  equal  the  movement  on  a 

single  one  of  our  trunk-lines  of  railroad  at  the  present  day 

Transportation  has  not  merely  become  important  in  itself,  it  has 
become  a  controlling  factor  which  gives  shape  to  each  man's 
private  business,  and  to  the  public  policy  of  every  civilized 
nation."  Hadley,  4 — 5. 

1.  The  evolution  of  the  present  transportation  system  in 
the  United  States.  The  bridle-path,  natural  water-ways,  the 
earth-road,  the  turnpike,  canals  and  railroads. 

2.  The  development  of  transportation  is  the  natural  result 
of  the  application  of  the  principle  of  division  of  labor. 

3.  The  completion  of  the  Erie  Canal  (1825).  "The  con- 
struction of  the  Erie  Canal  reduced  transportation  charges  to 
little  over  one-tenth  their  former  figures. ' '  Hadley,  3 1 . 

4.  The  infancy  of  the  railroad  (1830- 1850). 

The  Baltimore  and  Ohio  road  is  the  "pioneer."  It  was 
chartered  in  1827,  begun  in  1828,  and  operated  in  1830.  It 
was  fifteen  miles  in  length,  and  used  horse  power  and  sails.  In 
1 83 1  steam  power  was  adopted. 

5.  Land  grants  and  subsidies. 

Grant  to  Acres. 

Union  Pacific  Railway 13,000, 100 

Kansas  Pacific  Railway 6,000,000 

Central  Pacific  Railway 12, 100, 100 

Northern  Pacific  Railway 47,000,000 

Atlantic  and  Pacific 42,000,000 

Southern  Pacific 9,520,000 

Total 129,620,200 

More  than  $60,000,000  were  granted  by  Congress  to  the  first 
transcontinental  lines.  Bryce,  II,  507,  n.  i. 

6.  Roads  were  built  (i)  to  meet  the  demands  of  existing 
business,  (2)  to  develop  new  business  and  (3)  for  political  con- 
siderations. 

—22— 


7-  Consolidation.  The  first  lines  were  fragmentary.  Press 
of  business  demanded  consolidation.  The  New  York  Central 
between  Albany  and  Buffalo  was  made  up  of  sixteen  separate 
lines. 

(a)  Work  of  Thomas  Alexander  Scott  and  Cornelius 

Vanderbilt. 

(b)  Advantages  and  disadvantages  of  consolidation, 

8.  The  development  of  the  Telegraph,  Express  and  Postal 
Systems. 

9.  General  improvements  in  transportation. 

(a)  Improvement    in    road-bed.       Introduction    of 

Bessemer  steel  rails.     (1868). 

( b)  Use  of  heavier  cars.     Economy  in  increasing  the 

"paying  weight." 

(c)  Improvements  in  motive  power. 

(d)  Better  business  methods.      Rates  fixed  to  secure 
[  business.      "Back-loading." 

10.  Development  of  safety  appliances. 

[  The  best  and  most  economical  practice  combines 

"disciplined  intelligence  and  perfection  of  mechanical 
details. ' ' 

(a)  Air  brakes;  signals;  torpedoes;  the  block  s)^stem; 

gates  at  crossings;  "safety"  switches;  inter- 
locking bolts;  guard  rails;  foot-guards;  vesti- 
bules; watchmen. 

(b)  Many  accidents  are  caused  by  a  disregard  on 
the  part  of  the  public  of  the  rules  and  admonitions  of 
the  railroads.  There  is  need  of  more  stringent  laws 
against  trespass.  "So  far  as  information  may  be 
gained  from  the  train  accidents  of  1892,  but  few  of 
them  can  be  attributed  to  causes  beyond  the  control 
of  man.  In  most  of  them  the  remedy  is  to  be  sought 
in  more  efiicient  appliances,  regulations,  discipline 
and  inspection."  Haines,  253. 

11.  Increase  in  railway  mileage  in  the  United  States: 
•  Miles. 

I  1828 3 

I  1830 41 

[  1840 2200 

1850 7500 

1 860 29000 

1870 49000 

1 880 9367 1" 

1890 163597 

1896 182776 

—23— 


LECTURE  VII. 

Railroad  Legislation  in  the  United  States. 


"It  is  safe  to  say  that  a  large  part  of  the  railroad  legislation 
of  the  last  twelve  years  could  never  be  carried  out  at  all,  and 
that  a  large  part  of  the  remainder  would  do  more  harm  than 
good  to  all  concerned.  The  attempt  to  legislate  for  the  shippers 
without  regard  to  the  railroads  is  as  much  of  a  mistake  as  the 
attempt  to  legislate  for  the  railroads  without  regard  to  the 
shippers."  Hadley,    23. 

1.  The  legislation  of  the  early  period  was  intended  to 
encourage  railroad  building. 

(a)  General  railroad  laws. 

(b)  Subsidies. 

2.  Laws  attempting  to  limit  dividends  have  generally 
failed  to  accomplish  their  purpose.  They  have  sometimes  been 
an  obstacle  to  the  reduction  of  rates. 

3.  Early  attempts  at  railway  taxation  were  exceedingly 
crude.  There  was  no  fixed  basis  for  assessment.  "The  difier- 
ence  in  the  assessment  of  the  New  York  Central  and  Hudson 
River  Railroad,  where  for  all  the  purposes  that  the  road  can  be 
used,  it  is  of  the  same  value  to  the  company,  is  $24,000  per  mile." 

New  York  State  Assessor's  Report,  1873. 
(a)     "There  is  a  growing  belief  that  the  tax  valua- 
'  tion  should  be  based  on  earnings  or  earning 
capacity."  Hadley,  127. 

4.  Legislation  to  enforce  railroad  liability: 

(a)  Accidents.     Passengers    are     now    quite     well 

protected  by  legislation.  This  is  not  the  case 
with  railway  employes. 

(i)  Car- coupler  laws.  Haines,  38 — 61;  and 
Eleventh  Aiinual  Report  of  the  Interstate  Com- 
merce Conimissi07i ,  127. 

(b)  Liability  of  railroads  as  common  carriers. 

5.  Laws  to  regulate  railway  rates  have  been  generally 
unsatisfactory. 

(a)     Granger  law*.     (1870-1877). 

—24— 


"The  efiects  were  most  sharply  felt  in  Wiscon- 
sin. The  law  reducing  railroad  rates  to  the  basis 
which  competitive  points  enjoyed,  left  nothing  to  pay 
fixed  charges.  In  the  second  year  of  its  operation,  no 
Wisconsin  road  paid  a  dividend;  only  four  paid 
interest  on  their  bonds.  Railroad  construction  had 
come  to  a  standstill.  Even  the  facilities  on  existing 
roads  could  not  be  kept  up.  Foreign  capital  refused 
to  invest  in  Wisconsin;  the  development  of  the  state 
was  sharply  checked;  the  very  men  who  had  most 
favored  the  law  found  themselves  heavy  losers.  These 
points  were  plain  to  every  one.  They  formed  the 
theme  of  the  Governor's  message  at  the  beginning  of 
1876.  The  very  men  who  passed  the  law  in  1874, 
hurriedly  repealed  it  after  two  years'  trial." 

Hadley,  135. 
(b)     State  Commissions. 

6.  English  and  American  railway  legislation  contrasted. 

7.  Limitation  of  new  construction  of  railways.  Augustus 
Schoonmaker  in  the  Independent,  June  i,  1893.  Also  in  Com- 
pendium, 96. 

8.  The  Interstate  Commerce  Commission: 

(a)  Its  history. 

(b)  Its  powers. 

(c)  Its  influence. 

(d)  Its  reports. 

9.  Comparative  railroad  legislation. 

"But  as  preliminary  to  determining  on  a  proper 
course  of  action  in  the  direction  of  harmonizing 
all  American  railroad  legislation,  both  state 
and  national,  it  would  seem  wise  to  have  a 
compilation,  carefully  classified,  of  the  railroad 
laws  of  all  the  states.  Being  for  the  benefit  of 
all,  this  work  should  be  done  at  the  expense 
of  all — that  is  through  the  Federal  Govern- 
ment." W.  D.  Dabney.  Proceedings  of  National 
Convention  of  Railroad  Co77imissio7iers ,  April, 
1892.     Also  in  Cojnpendiiun,  104. 


—25- 


LECTURE  VIII. 
Railway  Rates. 


1^ 


No  system  of  railway  rate-making  has  yet  been  devised 
which  is  satisfactory  both  from  the  theoretical  and  practical 
standpoints. 

1.  The  "cost  of  service"  theory.  Much  might  be  said  iu 
favor  of  this  plan  from  the  theoretical  standpoint.  It  is,  however, 
impracticable. 

(a)  The  cost  of  service  cannot  be  ascertained. 

(b)  Even  if  it  could  be  determined  the  plan  could 
not  be  applied  as  the  cost  of  service  on  competing 
lines  would  not  be  the  same  and  competition  would 
be  done  away  with.  Again,  goods  of  large  bulk  and 
small  value  could  not  pay  the  rate  thus  determined. 
Ac  worth,  52. 

"The  case  of  a  railroad's  estimating  the  cost  of 
doing  a  particular  piece  of  business  is  not  unlike  that 
of  a  lawyer  estimating  the  cost  of  giving  an  opinion." 
Alexander,  3. 

2.  "Equal  mileage  rates"  would  not  be  equitable  even  on 
the  "cost  of  service"  theory. 

"And  experience  has  taught  even  the  least  observant  critic 
that  equal  mileage  rates,  pure  and  simple,  are  an  absolute  im- 
possibility. In  truth  equal  mileage  rates  are  only  cost  o.^  carriage 
rates  in  their  crudest  form,"     Acworth,  37. 

3.  The  method  of  charging  "what  the  traffic  will  bear"  is 
the  best  yet  suggested  but  is  not  satisfactory.  This  involves  a 
discrimination  in  favor  of  certain  classes  of  goods  and  certain 
localities.  Great  care  is  necessary  in  administering  this  system. 
See  Hadley,  iio-iii;  116.     Acworth,  60—63. 

(a)  "The  principle  of  charging  what  the  traffic  will 
bear,  gives  the  railroads  a  dangerous  power,  and  one 
which  is  often  abused;  a  power  against  which  com- 
petition furnishes  no  remedy.  Yet  if  the  analysis  of 
the  practice  of  railroads  with  regard  to  freight  charges 
be  correct,  and  if  our  illustrations  mean  anything  at 

—26— 


all,  it  is  unquestionably  the  principle  which  enables 
railroads  to  render  most  efficient  service  to  the  com- 
munity."    Hadley,  123-4. 

(b)  In  speaking  of  this  principle,  Acworth  says: 
"Its  effect  has  been  to  raise  rates  nowhere,  to  reduce 
them  somewhere,  and  therefore  on  the  whole  to 
bring  down  the  average.  Secondly,  to  benefit  the 
consumer  by  widening  the  area  of  supply,  and  so 
securing  that  the  products  shall  reach  him  charged 
with  no  monopoly  profits.  And,  thirdly,  to  benefit 
the  country  at  large  by  opening  up  fields  of  profitable 
industry  in  districts  which  were  previously  handi- 
capped out  of  the  contest  by  the  cost  of  carriage."  p.  66. 

(c)  Objections  to  the  principle. 

(i)  In  theory.     (2)   In  practice.     (3)   Charging 
what  the  traffic  will  Jtof  hcsir.  Alexander,  4-5. 

4.  Fluctuating  rates.  Stable  rates  are  more  to  be  desired 
than  those  which  average  lower  but  are  uncertain.  Business  can 
adapt  itself  to  uniform  rates  but  is  disrupted  by  fluctuating  ones. 

"One  could  fill  pages  with  extracts  from  American  utter- 
ances to  the  effect  that  what  they  want  is  not  cheapness  but 
reasonable  rates,  combined  with  equality,  publicity  and  perma- 
nence."    Acworth,  157. 

5.  Discriminations: 

(a)  Freight   classification.      Discrimination   of  this 

sort  is  justifiable. 

(b)  lyocal   discriminations.       Some   kinds  of  local 

discriminations  are  serious  evils. 

(c)  Discrimination  between   individuals  is  ruinous. 
"None   of  our  railroads  are  able  to  command  all 

the  business  their  tracks  will  accomodate,  and  few  of 
them  find  it  easy  to  meet  their  fixed  charges  and 
dividends  to  stockholders.  Consequently,  the  strug- 
gle for  business  is  sharp  wherever  they  come  into 
competition,  and  the  easiest  way  for  any  single  road 
to  get  a  great  share  of  it  is  to  pay  the  large  shippers 
for  it  by  giving  them  private  rates  or  rebates.  These 
rebates  give  the  favored  shippers  undue  ad- 
vantages over  their  competitors  in  business,  and  are 

—27— 


most  cruel  wrongs  and  injuries  to  the  latter,  and  to 

the   community    as   a  whole, The  common  law 

has  always  condemned  them,  and  given  damages  to 
parties  who  could  show  themselves  discriminated 
against."     Alexander,  21-22.     See  also  Acworth,  154. 

6.  The  evils  of  unrestricted  competition. 

7,  Combinations  or  pools:     Co^npcndiiim  229-250. 

(a)  To  fix  rates.     Haines,  335. 

(b)  To  divide  the  joint  earnings. 

(c)  To  apportion  the  territory. 

(d)  To  divide  the  business. 

8.  Diflferentials. 

9,  The  ethics  of  the  free  pass  system. 


LECTURE  IX. 

English  Railroads. 


/fw 


1.  The  English  railroad  is  operated  under  more  favorable 
conditions,  in  respect  to  legislative  control,  than  is  the  American. 
Parliamentary  legislation  has  been  reasonable,  and  the  English 
railway  has  not  been  restricted  in  its  privileges  by  the  legisla- 
tures of  forty-five  states. 

2.  The  English  railway  is  characterized  by  stability  in 
construction  and  in  business  relations.  The  road-bed,  bridges, 
and  buildings  are  made  in  the  most  substantial  and  expensive 
manner.  The  average  cost  per  mile  for  construction  in  England 
in  1883  was  $204,500;  in  America  the  average  cost  per  mile  for 
the  same  year  was  $61,800.  The  average  cost  for  the  whole  of 
Europe  was  about  $115,000  per  mile.  These  figures  indicate  the 
superior  stability  of  English  railway  construction. 

3.  English  railway  legislation: 

(a)  Period  of  construction,  1830-1850. 

(b)  Period  of  combination,  1850 . 

(c)  No  subsidies  were  asked   for,  as  they  were  not 

needed. 

4.  Rates.     It  is  difficult  to  compare  the  freight  rates   of 

—28— 


England  with  those  of  America,  as  in  England  the  railroad 
collects  and  delivers  the  goods.  Shippers  also  quite  generally 
furnish  their  own  cars. 

(a)  Passenger  rates  are  lower  in  England  than   in 

the  United  States. 

(b)  L,ow-class  freight  rates  are  higher  in  England 

than  in  the  United  States. 

(c)  Competition  is  much  restricted  in  England.     "I 

do  not  think  there  is  at  this  moment  a  com- 
petitive rate  existing  in  the  kingdom." 

(d)  Pooling  is  legalized  in  England,  but  not  in  the 

United  States. 

(e)  The  railway  clearing  house. 

5.  Stockwatering,  in  its  most  objectionable  forms,  does  not 
prevail.  Dividends  are  not  limited  by  law,  hence  there  is  no 
incentive  to  water  the  stock  in  order  to  disguise  the  profits.  The 
bonded  indebtedness  of  the  English  railroads  is  not  great,  and 
the  dividends  are  higher  and  steadier  than  in  the  United   States. 

Hadley,  156. 

6.  The  English  Railway  Commission. 

7.  Needless  railway  construction  is  obviated. 

It  must  be  shown  that  there  is  need  for  the  proposed  road 
before  the  charter  is  granted.  Massachusetts  has  a  similar 
provision,  and  every  state  should  exercise  some  restraint  upon 
reckless  and  useless  construction.  Walker,  Effect  of  Competition 
Upon  Raihvay  Constructio7i  a7id  Operation^  12. 

8.  "From  the  data,  I  believe  the  English  roads  get  as 
much  again  for  freight  and  passenger  traffic  as  we  do,  and  pay 
about  half  as  much  for  wages 

The  following  comparison  of  the  wages  paid  American  and 
English  railway  labor  will  suffice,  as  the  same  ratio  extends 
substantially  through  other  branches  of  railway  service: 

Per  day.  Per  month, 

Engineers.  Firemen.        Conductors. 

United  States  $3-65  $2.05  $82.40 

England  $1.25  to  $1.87         $0.75  to  $1.12  I30.40 

This  comparison  is  yet  more  favorable  to  American  railway 
labor  when  the  longer  hours  and  more  onerous  conditions 
which  constitute  a  day's  work   in   England   are  considered.     Of 

—29— 


course,  wages  on  the  Continent  are  still  lower  than  those  in 
Euglaud.  So  it  will  be  seen  that  the  United  States  presents  the 
anomaly  of  pa)ang  the  highest  rate  of  any  country  in  the  world 
to  those  engaged  in  transportation,  and  receiving  the  lowest  rate 
of  any  country  in  the  world  for  carrying  freight  and  passengers." 
Robert  P.  Porter  in  Boston  Transcript,  August  19,  1897. 


r<M^ 


LECTURE  X. 

Continental  Railways  and  State  Ownership. 


The  French  System. 

1.  In  the  United  States  and  England  the  initiative  in  great 
enterprises  is  generally  left  to  the  individual;  in  Continental 
Europe  the  participation  of  the  government  in  such  matters  is 
considerable.  Private  enterprise  was  not  equal  to  the  task  of 
furnishing  canals  and  railways  to  Continental  Europe,  and  as  a 
result  the  state  was  compelled  to  assist  materially  in  their  con- 
struction. 

2.  France  assisted  the  companies  in  constructing  their  lines, 
exercised  jurisdiction  over  them,  but  did  not  own  the  roads, 

3.  Highways  and  canals  in  France  in  1830. 

4.  The  French  system  was  comprehensive  and  complete. 

(a)  Roads  were  not  built  unless  they  were  needed. 

(b)  Each  company  had  a  monopoly  in  its  own  dis- 

trict. 

5.  Legislation  of  1859. 

6.  The  movement  for  state  ownership  in  1877  was  largely 
due  to  the  evident  advantage  accruing  from  the  state  roads  to 
the  German  government  in  the  Franco-Prussian  war  (1870-71). 

7.  Gambetta's  efforts  in  behalf  of  state  railroads. 

8.  Railway  rates  have  not  been  lowered  in  France  in  recent 
years  to  the  same  extent  that  they  have  been  in  other  countries. 

"The  rates  in  the  latter  year  (i88i)were  1.55  cents  per 
passenger  mile  and  1.63  cents  per  ton  mile.  These  rates  are  on 
the  whole  much  higher  than  those  of  Belgium,  probably  some- 
what higher  than  those  of  Germany,  and  somewhat  lower  than 

—30— 


> 


those  of  Austria.  Compared  with  the  United  States,  they  are, 
of  course,  much  lower  for  passengers,  and  much  higher  for 
freight."  Hadley,  201. 

The  German  System, 

1 .  The  French  system  was  carefully  planned  with  Paris  at 
the  center.  The  German  system  was  developed  without  refer- 
ence to  any  national  plan.  Each  state  built  its  lines  to  meet  its 
own  particular  needs. 

2.  The  services  of  Bismarck  in  securing  a  system  of  state 
railroads.  The  military  idea  was  dominant.  Bismarck  suc- 
ceeded in  Prussia,  but  failed  in  the  other  states.  In  Prussia  in 
1885  there  were  13000  miles  of  state  road  and  1000  miles  owned 
by  individuals.  "Prussia  is  now  the  typical  example  of  state 
railroad  ownership. "       Hadley,  208. 

3.  Effects  of  wars  of  1866  and  1870-71  upon  railroad  build- 
ing and  management. 

The  Austrian  System, 

I  The  Austrian  system  was  influenced  by  the  French  and 
German  systems.  About  one-fourth  of  the  mileage  is  in  the 
hands  of  the  government  and  the  tendency  is  toward  state 
management. 

The  Belgian  System, 

1.  Belgium  was  an  almost  ideal  state  for  a  government 
system  of  railroads. 

2.  The  government  built  the  main  lines,  while  private 
corporations  were  permitted  to  construct  the  subsidiary  ones. 
Manj-  of  these  latter  lines  were  purchased  by  the  government 
until  now  the  state  owns  about  75  per  cent  of  the  entire  mileage. 

3.  The  system  has  produced  many  good  results.  The 
passenger  rates  are  probably  the  lowest  in  the  world.  The 
freight  rates  are  lower  than  those  of  other  European  countries. 

4.  Many  of  these  good  results  have  been  erroneously 
attributed  to  state  management. 

"While  not  withholding  the  freest  praise  from  the  Belgian 
system,  we  may  fairly  a.scribe  much  of  its  success  to  other  causes 
than  enhghtened  state  management  or  deliberate  public  poHcy." 

Hadley,  218. 

—31— 


5-     The  application  of  the  postal  principle  of  state  manage- 
ment to  railroads. 

(a)     According   to   Professor  Jevons  state  manage- 
ment of  any  industry  is  or  may  be  successful  under 
the  following  conditions: 
"(i)     The  work    must  be   of  an  invariable  and 
routine-like   nature,  so  as  to  be  performed 
according  to  fixed  rules. 

(2)  It  must  be  performed  under  the  public?  eye 
or  for  the  service  of  individuals  who  will 
at  once  expose  any  failure  or  laxity. 

(3)  There  must  be  very  little  capital  ex- 
penditure, so  that  each  year's  revenue  and 
expense  account  shall  represent  with  ap- 
proximate accuracy  the  real  commercial 
success  of  the  undertaking. 

(4)  The  operations  must  be  of  such  a  kind 
that  their  union  under  one  all-extensive 
government  monopoly  will  lead  to  great 
advantage  and  economy." 

L,.  Darbyshire  in  Evening  Leader  [New 
Haven],  Sept.  11,  1897. 
The  postal  system  meets  these  conditions;  the  railway  system 
does  not. 

(b)  "Who  can  depict  the  enormity  of  saddling  upon 
our  national  government  the  political  responsi- 
bilities which  would  attach  to  the  ownership 
and  control  of  185,000  miles  of  railroad,  and  of 
placing  upon  the  pay-rolls  of  the  government 
1,000,000  railroad  employes,  which  number, 
under  national  administration,  would  un- 
doubtedly be  enormously  increased?" 
Joseph  Nimmo,  Jr., 

in  Fo7-u7n  for  September,  1897. 


'      .1       '.  tiiu 


-32- 


